Watch this space for response and analysis of the federal budget from CCPA staff and our Alternative Federal Budget partners. More information will be added as it is available. Commentary and Analysis Aim high, spend low: Federal budget 2019 by David MacDonald (CCPA) Budget 2019 fiddles while climate crisis looms by Hadrian Mertins-Kirkwood (CCPA) Organizational Responses Canadian Centre for Policy […]

Founder of the political Hip-Hop group The Coup, Boots Riley is a musician, rapper, writer and activist, whose feature film directorial and screenwriting debut — 2018’s celebrated Sorry to Bother You — received the award for Best First Feature at the 2019 Independent Spirit Awards (amongst several other accolades and recognitions). "[A] reflection of the […]

This week the Canadian Centre for Policy Alternatives – BC Office is pleased to welcome Emira Mears to our staff team as our newly appointed Associate Director. Emira is an accomplished communications professional, digital strategist and entrepreneur. Through her former company Raised Eyebrow, she has had the opportunity to work with many organizations in the […]

Supporters of fossil fuel infrastructure projects position themselves as friends of working people, framing climate action as antithetical to the more immediately pressing need to protect oil and gas workers’ livelihoods. And as the latest report from the CCPA-BC and Corporate Mapping Project confirms, this framing has become dominant across the media landscape. Focusing on pipeline […]

"Racialized workers in Ontario are significantly more likely to be concentrated in low-wage jobs and face persistent unemployment and earnings gaps compared to white employees — pointing to the “uncomfortable truth” about racism in the job market, according to a new study." Read the Toronto Star's coverage of our updated colour-coded labour market report, released […]

Can anyone out there help me? Just saw a headline on CNN saying that, in spite of Brexit chaos, unemployment was at an historic low. Likewise in US where in spite of Trump — could it really be because of? — unemployment is also at an historic low. Reminds me that back in the late 1970s there was a G-7 summit in London England. There were pictures in the press of the leaders, beginning with Thatcher. For Italy the joke was that politics was so volatile that no one could remember who was its leader. But guess which country had the best performing economy? Answer: Italy.

All of which raises the question: does it really not matter to the economy what is the state of the polity?

I had been waiting for last month’s publication of the book “Confronting Inequality” before preparing my annual update on income inequality and redistribution in Canada. I am glad I did because the book presents new and exciting empirical findings that shed light on the age-old equity/growth debate (more on that below), but also introduced me to the Standardized World Income Inequality Database (SWIID). Data comparability and granularity has been a challenge for inequality researchers looking at countries outside the OECD and EU. Specifically, the lack of inequality data for market income did not allow researchers to measure and analyze the redistributive effect of Government policy. In contrast, the most recent version of SWIID provides historical estimates of Gini coefficients for disposable and market income for 192 countries generally to 2016. Keen to make use of this new database, I’ve decided to turn my attention south to my birth continent of Latin America and focus on Venezuela.

There is of course much to be analyzed (and debated) about and in Venezuela from a foreign policy/intervention, constitutional legitimacy, humanitarian, political and economic perspective. My objective here is narrow: to present evidence-based analysis of Venezuela’s income inequality performance, from a historical (1990 to 2015) and comparative (other Latin American countries) perspective. I use the same framework of analysis as in previous posts and encourage interested readers to refer to these for further conceptual and technical background. The most recent SWIID data for Venezuela is 2015 and therefore my analysis does not cover the current period of deep economic contraction or hyperinflation, although in the Epilogue I do hypothesize how these severe macro-economic shocks have likely impacted income inequality.

Post the Second World War, the US became dominant in the world economy and a shift from coal to oil was deliberately taken by the state to weaken the power of coal-centred industrialization and tie the Middle East into American and European control. Transport of oil by pipeline and tanker created a fluidity that tended to eliminate nodal points where workers could exercise power.

The opening sentence of the 2011 book, Carbon Democracy: Political Power in the Age of Oil by the historian Timothy Mitchell, reads “Fossil fuels helped create both the possibility of modern democracy and its limits.” Carbon democracy is “a certain kind of democratic politics.” He observes: “Countries that depend upon petroleum resources for a large part of their earnings from exports tend to be less democratic.” Mitchell wants to moor that democracy in the materiality of coal and oil, which Innis called “dirt economics.” He wants to keep his eye not simply on oil revenues, as most scholars have, but on oil itself.

Coal was the first fossil fuel. Economically, it enabled the Industrial Revolution of sustained exponential economic growth, and politically, mass politics and liberal democracy. The transportation of coal necessitated the development of canals and railways with further powerful spread effects. (You get a sense of the command of history, and particularly economic history, that Mitchell has; this is political economy at its best.) The demand for other goods from distant places led to colonization and imperialism which undermined democratic development at home and abroad. At the same time, however, the concentration of people in cities and factories facilitated the development of new forms of collective democratic action including, for example, trade unions, and notably coal miners with considerable autonomy working underground.

That’s the actual title of a recent book (2015) by Robert E. Babe, who has a doctorate in economics and is professor of Information and Media Studies at the University of Western Ontario. The sub-title is Media, Power, and Democracy.

Harold Innis you know. If you don’t, get with the required reading. Noam Chomsky everybody knows. So who is Wilbur Schramm?

He’s the founder of Communication Studies in the U.S., which is your ordinary flourishing discipline, behavioral, quantitative, instant conventional wisdom, wholly helpful to power. In contrast is Innis as founder, with Marshall McLuhan, in Canada, of media studies, with tell-all titles like Empire and Communications, Bias of Communication, Changing Concepts of Time, and during his transition from studies of Canadian staples to media studies, Political Economy of the Modern State. Not behavioral. Not quantitative. Created paradigm of Canadian Political Economy — which eventually morphed into the New Canadian Political Economy. Dissenting wisdom, as it became increasingly critical of power, and dismissed and ignored by established power.

As for Chomsky, he and Innis are of a kind. That is the convincing case made by Babe in this book. You’ll learn more than you did about each of them and just might decide to emulate them more as activist scholars, particularly if university-based.

Chomsky, immortal, speaks truth to power endlessly. He’s co-author of Manufacturing Consent, of how the mass media can create consensus to do very wrong things. Chomsky, while maintaining his reputation for innovation in linguistic studies, has been extraordinarily active politically, demonstrating and speaking publicly from his opposition to the War in Vietnam, to civil rights in America, to the Iraq war, to today, where he is still speaking out and writing at 89.

Both Innis and Chomsky are motivated by circumstances. Neither was inclined to seek the quiet comfort of the ivory tower. Innis was affected by and responding to the First World War (in which he participated), the Great Depression of the 1930s, the Second World War, the atomic bomb, the beginning of the Cold War, the Korean war, and, throughout to Canada’s willing shift from the British to the American empire, the militarism of which Innis deplored. He was, however, not politically active outside the university and attacked those who were, notably CCFers, while insisting on their freedom of speech. All and all, a persistent intellectual radicalism

Chomsky, in his condemnation of American militarism and imperialism, has likewise strongly condemned those intellectuals who served power.

Babe thinks that Innis and Chomsky have in common a mistrust of elites and of power. We know from today’s populist politics how important that sentiment is. Both attacked power from the protection of a university base — which few academics do. Both were critical of what Galbraith, the Canadian-American professor, called the conventional wisdom. In my view that is the surest sign of their greatness as public intellectuals.

Things are moving quite fast, even too fast, since the federal government’s first poverty
reduction strategy was published
in August, at least for the aspects of this strategy which are problematic. The
unilateral decision to consider the Market Basket Measure (MBM) as “Canada’s
Official Poverty Line” is one of those. It ignores some useful expertise
developed about the MBM over the years, notably by the Centre d’étude sur la
pauvreté et l’exclusion (CÉPE), the institution meant to provide dependable and
objective information on matters concerning the application of Québec’s Act to combat poverty and social exclusion[1], as well as current discussions about the type of living standard
effectively assessed by this measure.

In 2009, the CÉPE carefully recommended the use
of the MBM “as the baseline measure to monitor situations of poverty from the
perspective of coverage of basic needs” (CÉPE’s advice, page 34),
stating explicitly that “while the market basket measure makes it possible to
monitor the evolution of poverty and the progress achieved, it fails to measure
exit from poverty, as based on the definition contained in the Act” (Ibid.)[2]. Yet the definition of
poverty given in the federal strategy is quite close to the Québec one[3].

Moreover, the federal decision was announced without waiting for the
results of the periodic revision of the MBM (rebasing process) by Statistics
Canada, which is still taking place. This decision is now on its way to be
legislated through Bill C-87, which was launched on November 6 (and incidentally,
does not mention the strategy’s definition of poverty). Meanwhile, Statistics
Canada has launched an online consultation asking
people’s advice on the MBM… with ill-calibrated data.

Let’s start with this point, since the consultation is ongoing and
invitations to respond are circulating within different organizations.

What’s wrong with Statistics Canada’s online MBM consultation

In this survey, held from October 15, 2018 to January 31, 2019, Statistics Canada “is conducting a consultation to gather input from Canadians to help validate how we are measuring poverty”. The ambiguity between the federal government’s haste to set the MBM as the official poverty line and the periodic rebasing process of the MBM by Statistics Canada is ubiquitous in the survey’s presentation, whose stated purpose is “to help validate the methodology of the MBM”:

“Recently, the Government of Canada announced that the Market Basket Measure (MBM) will be used as Canada’s Official Poverty Line. Statistics Canada is currently conducting a comprehensive review of the MBM.

The MBM is a measure of low income which is based on the cost of a basket of goods and services that individuals and families require to meet their basic needs and achieve a modest standard of living. Wherever individuals and families are living across the country, if they cannot afford the cost of this basket of goods and services in their particular community, they will be considered to be living below Canada’s Official Poverty Line.

By participating in this consultation, you will be supporting Statistics Canada’s ability to accurately measure low income and poverty.”

In other words, the frontier of poverty is officially tied to the MBM
threshold and then the public is consulted to assess whether it’s indeed the case!?

At lot of assumptions are made here through the association between what is meant by basic needs coverage, a modest standard of living (not defined by Statistics Canada[4]) and an official poverty line. What about the respective position of these concepts “within a field of possible thresholds” (CÉPE’s 2009 advice, page 34) in the continuum between poverty and non-poverty? More confusion is added in the questionnaire, where the MBM basket is presented as follows:

“The basket includes items such as healthy food, appropriate shelter and home maintenance, and clothing and transportation.

The items in the basket reflect prices in communities across Canada. […]

By selecting your province, city and family size, you can find out how much your family would need to stay out of poverty. Please tell us if you think these amounts are too high, too low or “about right”.”

Then people are asked to evaluate specific amounts for the basket’s various
components.

This seems like a departure from the usual rigour of Statistics Canada, which is not known to have ever broken down the MBM thresholds into specific amounts for the basket’s components for other households’ sizes than the two adults and two children reference family. And there is good reason for this.

In a 2010 empirical study, the CÉPE
showed that although it seemed to work for the total content of the basket (i.e.,
the total MBM threshold), the equivalence scale used to establish corresponding
thresholds for other family sizes (the square root of households size) did not accurately
represent the breakdown of expenditures for the specific sections of the basket
(food, clothing, shelter, transportation, other necessities), at least for one-person
households.

For example, the equivalence scale implies that to establish the cost of
a basic standard for a single person, one must divide the cost of the basket
for a household of four persons by two (the square root of four). However, in
practice, the comparable cost of food or housing for a single-person household will
not be half of what it is for a family of four. Most likely, it will amount to
less than that for food and more, even much more, for housing.

Yet the online consultation (as well as the federal strategy, on pages 69-70) simply uses the equivalence scale ratios to establish the cost of the basket components proposed for evaluation to respondents of various household sizes. The result is that the amounts are broken down in ways that don’t make sense, as shown in the inset.

Unrealistic apportioning of the MBM components in the online consultation

The first part of the table below presents amounts found in Statistics Canada’s online consultation for households of different sizes in Montréal, and calculates their monthly and annuals totals, which are not mentioned in the consultation.

The second part of the table shows that the amounts provided in the online consultation for each component of the basket closely match those obtained with the usual equivalence scale.

The third part of the table uses the coefficients observed by the CÉPE in its 2010 empirical estimation of equivalent expenditure levels between a household of two adults and two children and a single person household. It also adjusts the results to the annual MBM threshold that can be inferred from the consultation for this household. Even though the CÉPE’s coefficients are somewhat dated, they reflect the distribution of expenses as it was actually observed in Québec at the time, which is useful for illustrative purposes (and calls for further research and updated observations for various household sizes).

Indeed, it seems reasonable to suppose that where a Montreal family of four will spend $950 monthly for food, a person living alone is likely to spend closer to three times less (around $307 to $341, which is in line with a $315 recent estimate from Montreal Diet Dispensary), than two times less (480 $) as indicated in the consultation. Likewise, where this family of four will spend $750 for housing, an amount of $595 to $660 will not appear excessive for a person living alone. This time, the amount of $380 indicated in the online consultation is much too low.

What kind of results can be expected from such a consultation if the indicated
amounts for the key items in the basket are misleading?

A few pathways forward regardless

Slow and steady wins the race, says the fable. While the political will
to reduce poverty is much needed and welcome in Canada, it would be regrettable
to lose its potential due to a lack of reliable and credible foundations of its
chosen poverty measure.

The MBM is a useful cost-based measure of basic living standards, but it
needs proper care and assessment as an indicator within the broader concept of
poverty. Choosing it as the official poverty line in Canada without such
nuances compromises this proper use.

While consultations about the contents of the MBM are advisable, as we
can expect that standards of living change over time, these consultations must be
done in a manner that’s orderly and pays attention to the current state of
knowledge without skipping a step between what is known and what has to be
assessed.

What can be done in the meantime, if the federal government’s intent to
reduce poverty is serious?

Here are some suggestions.

Consider the MBM as a good indicator among
a larger set of reliable low income lines and characterize the existing or
considered lines in this set in relation to what they specifically reveal about
diverse experiences of income poverty across Canada.

Modify Bill C-87 accordingly and
characterize the MBM differently than as the official poverty line in Canada, e.g.
as an official line to follow the experience of poverty from the angle of basic
needs coverage, as is done in Québec.

Maintain the announced targets for the
reduction of low income rates in reference to the MBM for what it is, without
linking this line to the difference between being poor or not, and consider alternative
measures and targets that could be used to assess and reduce the number of
people living in poverty.

Implement the announced National Advisory
Council on Poverty, with a guaranteed independence in its mandate and
entitlements, and a sound representation of rights-based advocacy groups and
networks, including persons with a lived experience of poverty.

Maintain a distinction between having the
resources to cover one’s basic needs, as monitored by the MBM, and being free
from poverty as broadly defined in the national strategy to include the
resources, means, choices and power necessary to acquire and maintain a basic
level of living standards and to facilitate integration and participation in
society.

Request Statistics Canada, in reference to
the statement published in 1997 by its chief statistician of the time, Ivan P. Fellegi, to investigate what type of income
indicator could correspond more fully to a poverty line along this broader definition,
with respect notably to what has been published in Canada around the concepts
of living wage and living income.

Continue the ongoing revision of the MBM
by Statistics Canada and ensure a sound maintenance of the surveys needed for
its calculation.

Temporarily put on hold the items of the
online consultation about the MBM which are related to the cost of its various
components for household sizes other than the 4 persons reference household,
undertake the studies needed to establish realistic coefficients for breaking
down expenditures in the sections of the basket of goods and services according
to the size of households (in line with the 2010 CÉPE study), and start over
with this aspect of the consultation.

Acknowledge that this also requires the
elimination of structural and systemic barriers, including discrimination, and
calls for a variety of income and non-income inequality indicators in the
strategy’s dashboard.

There is still time to address these concerns and move the process in the direction needed to produce lasting and desirable results for all Canadians. Let’s hope the federal government listens and understands what is at stake, and then makes the necessary adjustments to get this right. It will be well worth the trouble for what comes next.

[1] An English version of the adopted act, without the enforcement
notifications, can be found here.

[2] “For the purposes of this Act, “poverty” means the condition of a human being
who is deprived of the resources, means, choices and power necessary to acquire
and maintain economic self-sufficiency or to facilitate integration and
participation in society” (Québec Act, article 2, French formulation here).

[3] “Poverty is: The condition of a person who is deprived of the resources,
means, choices and power necessary to acquire and maintain a basic level of
living standards and to facilitate integration and participation in society.”
(Opportunity for all, page 7, French formulation here, same page).

[4] Other Statistics Canada’s publications present the MBM basket as “representing a modest, basic standard of living” in English, and “correspondant à un niveau de vie de base” in French.

Vivian Labrie is an independent researcher, associated to the Institut de recherche et d’informations socioéconomiques (IRIS). She has been involved in various ways since 1997 in the actions that led to the adoption in 2002 of the Act to Combat Poverty and Social Exclusion by the Québec National Assembly, and in the follow up of its implementation afterwards.—This article is a slightly updated English version of the blog post “Une consultation en ligne sur la MPC à recalibrer”, which was originally published on the IRIS website on October 17, 2018.

Calling all Canadian students anywhere in the world and all post-secondary students in Canada who are working on papers taking a critical approach to the functioning, efficiency, social, and environmental consequences of unconstrained markets. The winning essays will receive a cash prize of $1,000 for the graduate student category and $500 for the undergraduate student category.

You can download a poster in English or Français. Please help us spread the word and post one in your department.

Open to all Canadian students, studying in Canada and abroad, as well as international students presently studying in Canada. All entrants receive a complimentary 1-year membership in the Progressive Economics Forum.

The definition of “student” encompasses full time as well as part time students.

Students eligible for the 2019 competition must have been/be enrolled in a post-secondary educational institution at some point during the period of May 2018 – May 2019.

LEVELS OF COMPETITION

There are two levels of competition:

One for undergraduate students;

One for graduate students*.

*Note: Those who have previously completed an undergraduate degree or a graduate degree, and are returning to do a second undergraduate degree will only be considered for the graduate student competition. The same holds for students who spend part of the academic year in a graduate program.

CONTENT OF THE ESSAY

Entries may be on any subject related to political economy, economic theory or an economic policy issue, and should reflect a critical approach to the functioning, efficiency, social and environmental consequences of unconstrained markets.

ELIGIBLE SUBMISSIONS

Eligible entries will be:

sent by email at the latest on April 29, 2019, to: PEFEssayContest2019@gmail.com

the only submission by the author(s) (i.e., one submission per person);

between 20-40 pages in length, and typed in 12-point font, double spaced;

referenced to academic standards (including any data);

written in either English or French;

original, single-authored essays that do not infringe upon the rights of any third parties;

Entrants consent to having the Progressive Economics Forum publish essays from winners and those receiving honourable mention. Each applicant will submit a valid email and postal address for correspondence.

ADJUDICATION

A panel of judges selected and approved by the Progressive Economics Forum will judge entries.

Entries will be judged according to the following criteria: substance and originality, writing style, composition, and organization.

The Progressive Economics Forum reserves the right not to award a prize or any prizes where submissions do not meet contest standards or criteria.

WINNING SUBMISSIONS

The winning essays will be announced at the Annual General Meeting of the PEF at the Canadian Economics Association Conference in Banff, AB.

A cash prize of $1,000 will be awarded the winner of the graduate competition; and $500 will be awarded to the winner of the undergraduate competition.

Steve Pomeroy, arguably Canada’s top affordable housing policy expert, has written a status update on Canada’s National Housing Strategy (NHS). His overview includes some great background material on Canadian housing policy generally.

Points raised in his analysis include the following:

-The Trudeau government’s much-anticipated NHS was unveiled in November 2017.

-In most provinces and territories, federal funding accounts for less than 10% of homelessness funding. Provincial, territorial and municipal orders of government fund most of the rest. Yet, just 5% of new funding under the NHS has been earmarked towards the Trudeau government’s goal of reducing chronic homelessness by half.

-Our federal government is good at funding/financing affordable housing; provincial/territorial governments, by contrast, are good at housing program design and implementation. Each should stick to what it’s good at (ergo: the federal government should let provincial and territorial governments lead when it comes to program design/implementation). Sadly, history suggests that federal officials will be reluctant to treat provincial/territorial governments as equal partners during the implementation of the NHS.

-Canada’s federal government does a very poor job of enumerating new social (i.e., non-profit) housing builds.

-Steve thinks it’s a mistake for the federal government to require provincial/territorial cost-matching for the Canada Housing Benefit (which is an important component of the NHS); though he’s not suggesting provincial and territorial governments get a ‘free ride’ on it either.

-Non-profit housing providers across Canada have been having trouble accessing funding currently available under the NHS.

I recommend reading Sam Gindin’s paper “Socialism for Realists” to be found in the current issue of the relatively new socialist journal, Catalyst. Sam spent most of his working life as a union economist and assistant to the President of the CAW, and writes often with Leo Panitch, most notably as co-authors of The Making of Global Capitalism.

I will not attempt a summary here, except to say that Sam tries to sketch a plausible framework for what a socialist economy might actually look like. By “socialist” he means that the economy would be mainly based on public ownership of the means of production (with a role for small enterprises and for different forms of public ownership), plus meaningful worker control at the workplace. His main focus is on how to strike the needed balance between state economic planning, and decentralization of decision-making to workers and their enterprises.

He stresses that any conceivable socialism will not exist in a post scarcity world and that serious collective decisions will have to be made on what to produce, how to divide output between public and private consumption, and how to divide productivity gains between rising consumption and shorter working time. A strong state will clearly be needed, albeit that the state can become much more democratic and some important decisions can be left to local authorities.

Markets will play a role within a feasible socialism, though as an element in overall planning. A labour market and wage differentials will continue to exist in a context of much greater income equality, some form of guaranteed income or employment, and a high social wage in the form of collective goods and services.

Perhaps the most original part of the paper is a reflection on how sector councils and linkages between them might build a bridge between worker controlled enterprises and central planning.

Hopefully, the paper will be widely read and debated. It challenges even democratic socialists to be much more ambitious, and will resonate with those who agree with Sam that being anti-capitalist is not enough, and that we need some kind of model of a possible future in mind to inspire a strong political movement for radical change.

One quibble — as acknowledged by the author, there is no discussion of how a planned economy would fit into global capitalism, or for that matter, of the feasibility of global socialism. I suspect the framework is only relevant if an economy has a high degree of internal coherence and self-sufficiency, as in the immediate post War period, which will in and of itself be very difficult to achieve.

I’ve recently written a ‘top 10’ review of a new book on supportive housing—i.e., subsidized housing with social work support—for persons with serious mental health challenges. The book’s an anthology that was edited by three Ontario-based researchers.

A key questions that emerges in the book is: Should such housing be owned and operated by for-profit providers, or by non-profit providers? An advantage of non-profit ownership, in my opinion, is that a non-profit entity eventually owns the asset.

Over at the Behind The Numbers website, I’ve written a blog post titled “Ten considerations for the next Alberta budget.” The blog post is a summary of a recent workshop organized by the Alberta Alternative Budget Working Group.

In recent decades all but the wilfully ignorant have had to face two facts: that climate change is taking place and that it is the result of what we humans are doing. The term Anthropocene was coined in 2000 in recognition of that latter hugely important fact. When had this new era began – and with it the end of the Holocene epoch that had been around for some 11,000 years of climate stability, a transition out of the Ice Ages, that then facilitated the spread of farming and permanent settlements. Some said it was the Industrial Revolution beginning ca 1750 and the enormous increase in the burning of coal and of carbon emissions. Then at a global gathering in 2016, geologists who decide this matter by examination of the earth’s strata ruled by majority vote that this new epoch of the Anthropocene had not actually begun until 1945. Two things were said to be causal. The first was the testing of the first atomic bomb in 1945 and its immediate use and then further testing which left radioactive evidence in the planet’s atmosphere. The second was what has come to be called the Great Acceleration, the leap in global economic growth and in world population post the Second World War facilitated by new global arrangements, and the even more rapid growth of carbon emissions.

At the same time that a consensus was forming on this, it became evident that human effect on the atmosphere had first happened some five centuries ago with the impact of the Old World of Europe on the New World of the Americas. European disease to which the new world had no immunity was utterly devastating. Fifty to sixty million people died, ninety percent of the population. In consequence, the way of life was pervasively disrupted and destroyed and with that withering of farming and settlement carbon emissions declined drastically. The result was not today’s global warming but global cooling. It was a one-shot event, sharp but short-run , but that it effected climate change in its time tells us how the ‘discovery’ of the New World was the destruction of its population.

That’s what the political theorist C.B. Macpherson (1911-1987) saw emerging historically with the rise of capitalism. Frank Cunningham in his just published intellectual biography of Macpherson, The Political Thought of C.B. Macpherson: Contemporary Applications describes possessive individualism as “The individual is proprietor of his own person, for which he owes nothing to society”. That sounds like an apt description of what is true today in the time of neoliberalism. In Cunningham’s words: “possessive individualism now stares one in the face at every turn.” Pervasive marketization has turned amenities and social services into commodities: “university students become clients; homes become real estate investments; cities become global competitors; ideas become marketable possessions.” This book ably demonstrates that and helps an economist of the progressive persuasion analyse our predicament.

Cunningham quite properly insists that possessive individualism is not an essential part of human nature – as is seriously argued by ascending cognitive science – but is historically constructed as political economy tells us. Cunningham likewise tells us that, for Macpherson, the alternative to possessive individualism was “developmental democracy” which transcends market capitalism. Economists can benefit from reading Cunningham’s analysis of what that means with respect to contemporary issues such as globalization, intellectual property, and inequality.

Adam Tooze. Crashed: How a Decade of Financial Crises Changed the World. Viking. New York. 2018

The global economic crisis is now more than a decade old, and is far from definitively behind us. Indeed, many fear, with good reason, that the recent, uneven and lethargic global recovery may soon come to an end, and that the next crisis of global capitalism could be even worse than that of 2008.

The financial crisis and resulting crisis of the real global economy triggered by the collapse of Lehman Brothers and other major Wall Street banks has already prompted the release of a small library of books. ( The best, to my mind, is Martin Wolf’s, The Shifts and the Shocks.) But Adam Tooze provides us with the first truly comprehensive account. It is the work of a contemporary historian who draws on political and economic theory to frame a compelling and disturbing narrative, and is likely to become a standard and indispensable reference.

Over more than six hundred pages, Tooze looks at the origins and implications of the financial crisis around the world, proceeding both chronologically, geographically and thematically. In an extraordinary work of scholarship, he surveys the global political economy and financialized capitalism of the pre crisis period, the unfolding of the financial crisis in the United States and Europe, the spread of the crisis to developing countries and Eastern Europe, the extraordinary response of China, the euro zone crisis and the agonies of Greece and Southern Europe, and the political implications of the crisis.

He offers a coherent account of how the crisis set the stage for the rise of right-wing populism around the world, and speculates on how the global economy may evolve in a new age of explicit and escalating rivalry between the United States and China. What is at stake is the possible collapse of the “neo liberal” global economic and political order.

One relatively novel argument made in the book is that the global economy has to be seen, not so much as a set of discrete national economies trading with each other, as a vast “macro financial” web of corporate balance sheets and financial flows. In such a world, states can rapidly experience an exit of capital and economic collapse without necessarily running large trade or public finance deficits, while the hegemonic power, the United States, can readily finance such deficits by virtue of the unique status of the US dollar as the global reserve currency.

Tooze does not look in detail at the underlying contradictions of the pre crisis period, but he does note the key point that growth in an age of rising inequality and redistribution of income from labour to capital was dangerously reliant upon the growth of private debt, speculative bubbles, and the recycling of global trade surpluses to deficit countries, notably from China to the United States.

He broadly endorses the view that neo liberal capitalism has been associated with “secular stagnation” due to inadequate demand, offset only by the massive expansion of debt. As he notes, the fear was that crisis would result from a collapse of the US dollar, but instead it came from the collapse of global finance due to a massive accumulation of bad debts dispersed across the world. In response to the crisis there was, somewhat ironically, a flight to the US dollar as US government bonds were seen as the safest asset available.

Where Tooze departs a bit from the standard account is in his understanding and insistence that this was not just a crisis of the US banks, but a crisis of global and especially North Atlantic finance. Tight links between the Wall Street banks, the City of London, and the major European banks produced a global systemic financial crisis, not a crisis of so-called Anglo-Saxon capitalism as many European critics have argued. The euro crisis was also the consequence of low quality debt and speculative housing bubbles in some countries (the UK, Spain) rather than the excessive growth of public debt. Indeed the fiscal problem of countries hit by crisis in southern and eastern Europe were mainly the result of the crisis of the real economy which increased government deficits and debts, and the decision of many governments (most notably Ireland) to transfer bad bank assets to the public sector.

Building on the historical analysis of Leo Panitch and Sam Gindin in The Making of Global Capitalism, Tooze argues that the global economy has been economically and politically dominated by the United States, which remained in 2008, and remains even more so today, the only power capable of providing global economic leadership. “The crisis had the effect of recentering the world financial economy on the United States as the only state capable of meeting the challenge it posed.” He recounts how the US Treasury and the US Federal Reserve were absolutely key to resolution of the crisis of the banks in 2008, extending liquidity (very low interest US dollar credit lines) to global and not just US banks.

Similarly, massive US government purchases of distressed financial assets to bail out the financial system through the TARP and other programs were extended from the US banks to major European and even developing country banks. Key officials like Larry Summers and Tim Geithner won the day when they argued for “big bazooka, shock and awe” tactics to stabilize the financial system.

While there was a lot of bungling, experimentation and political resistance along the way, the US Treasury and the US Federal Reserve were indeed able to stabilize the US financial system fairly quickly by a combination of outright injections of new capital and arm twisting to force mergers. “Hair cuts” for those who had caused the crisis by investing in high risk, low quality assets and through reckless speculation and outright fraud were modest at best.

These bail-outs have been widely criticized, with good reason, for saving financial capital at the expense of working people who had to endure high unemployment and a huge wave of home foreclosures. But the US political system, even progressive Democrats included, would not even contemplate nationalizing the banks. In that context, a viable financial system and normal credit flows had to be restored by socializing bad debts.

The alternative to bail outs was to experience what happened in the eurozone, a failure to deal with insolvent banks through “extend and pretend” half measures which postponed an outright collapse of the banking system but without dealing with bad debt. “The eurozone, through willful policy choices, drove tens of millions of its citizens into the depths of a 1930s style recession. It was one of the worst self-inflicted disasters on record.” Tooze argues that the euro area also effectively sidelined itself from any pretensions to global economic leadership.

Fortuitously, US leadership also extended to fiscal policy in response to the collapse of the real economy. The stimulus program of the Obama administration could and should have been far bigger and lasted far longer, as was understood by those who had learned the lessons of the Great Depression in the 1930s, but again it was much more significant than similar programs in the UK and Europe endorsed by a new global forum, the G20 as an immediate fix.. Here there was a quick return to fiscal austerity and deep spending cuts long before growth and employment had recovered, with Germany and smaller Northern European countries demanding harsh and indeed sadistic fiscal measure as the precondition for any help to heavily indebted countries. In the most troubled countries, there was a death spiral as insolvent banks became every more shaky as the real economy collapsed and interest rates soared well above those of Germany.

The euro zone as a whole failed to act until very late in the game, when the European Central Bank finally announced in July, 2012 that it was prepared to “do what it takes” to bring down interest rates on debt denominated in euros. This failure was partly due to institutional architecture (the narrow mandate of the ECB, tight rules on fiscal policy) and partly due to German insistence that recovery had to be based on austerity and wage discipline to restore global competitiveness, without heed to the immediate consequences. Greece was crucified as a salutary lesson to others. Today, the banking crisis is far from fully resolved, most notably in Italy, public debt has reached very high levels in some countries where the crisis has hit hardest, and output has grown little above pre crisis levels while unemployment remains very high.

Toooze further notes and details that China was an absolutely key player in resolving the crisis through massive fiscal stimulus, and continued willingness to retain and expand its enormous holdings of US dollars. “China’s response to the financial crisis it imported from the West was of world historic importance, dramatically accelerating the shift in the global balance of economic activity towards East Asia.” To give an idea of the scale, between 2008 and 2014, China built 10,000 kilometres of rail capable of running trains at 360 km per hour, in the process gaining a massive technological advantage. And health care coverage was extended from 30% to 90% of the population through expansion of subsidies and a massive construction program for health care facilities.

Tooze endorses and details the argument that the bail outs of finance, massive unemployment and fiscal austerity set the stage for a major discrediting of centre left neo liberal parties and the rise of right-wing populism in the US, the UK in the form of Brexit, and much of Europe. In the United States “in the name of economic nationalism and the American dream, the right wing claimed the cause of systemic change, while the Democratic Party establishment filled the middle ground the Republicans vacated. “ Trump explicitly challenges the global capitalist order in the form of America first economic nationalism and rejection of global institutions like the WTO.

More widely, “(s)ince 2007 the scale of the financial crisis has placed the relationship between democratic politics and the demands of capitalist governance under immense strain. Above all, this strain has manifested itself … in a crisis of the political parties that have mediated the two.” Moderate parties of the centre left which championed global capitalism and did little to alleviate the impacts of the global crisis on working people have paid a high political price, threatening the future of the global system as is it still exists. Social democracy in the eurozone has massively retreated as the populist right has rejected globalism and even the European Union itself in favour of economic nationalism and racial xenophobia.

Looking to the future, Tooze notes with many others that the recent global recovery has been built on the fragile base of continued growth in debt with very limited reform of global finance. Future crises are hard to predict, but are inevitable. He could, perhaps, have said more about what a stable and equitable growth model might look like. What he instead stresses, rightly, is the crisis of global political capacity to regulate the system. “With Trump as president and the Republicans dominating Congress, it is an open question whether the American political system will support even basic institutions of globalization let alone any adventurous crisis fighting at a national or global level”

The eurozone is seemingly incapable of resolving its own problems, as not just the UK but also Italy and the right in France look to the exits. Meanwhile, “China’s economic triumph is a triumph for the Communist Party. This is still the fundamental reason for doubting the possibility of truly deep co-operation with China in global economic governance. Unlike South Korea, Japan or Europe, China is not a subordinate part of of the American global network.”

We indeed live in profoundly dangerous times. Fortunately Adam Tooze has given us a narrative and analysis that illuminates where we have been, though he has no clear view of how progressive forces should and could re-shape the crisis prone and deeply inequitable global capitalist system created in the run-up to 2008.

Remarks at a posthumous book launch of his Myth, Mind and Religion at Massey College, University of Toronto, October 2018

For more than 50 years, going back to the days of the old Department of Political Economy, Abe was my colleague in teaching and researching economic history and political economy, my intellectual soulmate, and my closest friend. I have many fond memories.

Let me go back to that wondrous decade of the sixties. This incredible book which Abe has left us begins with what he calls the Radical Decade from the mid-sixties to the mid-seventies, and takes us back to that at the end.

The drabness of he boring 50s, when the conventional wisdom took up all the available intellectual space, morphed into the exciting 60s when suddenly anything seemed possible, from the powerful preaching of George Grant in his Lament for a Nation to, on this campus, that wildest of scholars, Marshall McLuhan – with both Abe and myself participating in his famous weekly seminar.

Even the venerable Department of Political Economy woke up. Under the leadership of Abe younger members of a rapidly growing faculty created the University League for Social Reform, the ULSR, and it began to publish a series of books in Canadian political economy.

Abe became editor of the fusty prestigious Canadian Forum, restructured it editorial board, and restored it reputation as the progressive magazine of Canada’s democratic left.

Abe was a member of a group of faculty and students, including Michael Ignatieff – and myself – which organized a most successful teach-in on this campus on the War in Vietnam.

A major issue on which the orthodox economists had closed their minds was that of foreign, specifically American, ownership of the Canadian economy as the central dimension of the Canadian-American relationship. Abe, though a junior member of the economics profession, had the courage to take a critical stance. He provided intellectual support for the Hon. Walter Gordon, who compelled the Pearson government to appoint a task force to advise on foreign ownership of eight economists including Abe and myself. Our report was a Canadian contribution to that celebrated year which is being widely celebrated at the moment. We briefly brought balance to the discussion of foreign ownership.

What I am saying may sound like a retreat into medieval, even ancient history for, as we know, the neo-liberal message of Thatcher, Reagan and Mulroney was shortly to return us to the status quo of closer integration of the Canadian economy into the larger imperial American economy.

Still, the nationalist surge of the 60s, of which Abe was the resident theorist, while it abated, arguably left as its legacy a clearer sense of what constituted Canadian identity.

Now there is Trump and we could once again use a voice like Abe’s, with its radical message delivered in a moderate tone with wisdom and wit.

Consider arguably the best pun of this renowned punster: “Every dogma has its day.” Can you not hear him saying: “Hard to Trump that.”

Like all sensible folk I was myself opposed to the NAFTA at the outset, convinced that it did more for the corporations than for the rest of us. I’m still of that view.

Is it possible that the biggest change that is now taking place is in the name itself, from NAFTA to USMCA- perhaps done so that Trump can boast that he delivered on his promise to get rid of NAFTA? A number of commentators on both sides of the CanAm border have written, in the words of John Ibbitson in the Globe and Mail, that the USMCA is “essentially the old NAFTA tilted more in America’s favour.” Is that all there is?

Firstly it’s quite a tilt – like the US keeping a special tariff on aluminum and steel from Canada, on the grounds, believe it or not, of national security. Talk about absurdly fake facts.

Let’s go back to the beginning in the late 1980s. US and Canada had just signed the Free Trade Agreement when, with the ink hardly dry, the US insisted on adding Mexico. We thought we’d made a one-on-one deal, a special arrangement that got us inside what our government thought, wrongly as it turned out, was a rising tide of American protectionism, which has now happened a quarter of a century later, and we waited almost a year to join this new round of negotiations. This initial lack of enthusiasm has not stopped us, from that time forward, peddling the praises of NAFTA and fighting hard to keep it.

If we didn’t know it before we now do: that trade agreements go way beyond trade in their breadth of corporate rights making it hard to judge which side of ordinary people gets the net advantage. And we’re also learning, at least in the case of Brexit, that abrogation, untangling it all, is hard to say the least.

Should Canada at some point – and not simply as a negotiating position – have left the table never to return? To come down to earth, recall that Trump said that without an agreement he would impose a 25% tariff on cars made in Canada entering the US. The consequences would have been simply devastating, beyond contemplation, for southern Ontario, for Canada’s industrial base. Significantly, Jerry Dias, President of Unifor, thinks the deal is good enough. It will push up car prices, but that will lessen carbon emissions.

Ibbitson goes on to write that the message from all this is “the mother of all wake-up calls for Canada to diversify.” We’ve got too many eggs in the American basket and have to diversity our trade beyond the American market. That may strike y0u as a no-brainer. But what is being said is that, one trade agreement having failed us, we should sign on to more. Which is what we are already doing.

Methinks that is the wrong lesson. The whole vast apparatus that passes under the name of globalization has gone too far. We need less reliance on trade, not more. We need to strengthen our domestic economy so it plays a bigger role in generating jobs and incomes.

Lest that sounds like whistling in the dark, it isn’t. Most economists admit that globalization has increased inequality within economies. In this regard, less globalization is of itself a good thing. What is likewise in order is active policies, like real rather than fake American-style tax reform, to increase equality within Canada and thereby the demand for goods and services.

One more point. Too much trade means too many goods being transported too far which means too much carbon emitted which means too much climate change which threatens to get us all. I’m too old to do the arithmetic, but diversifying Canadian trade reliance away from the US next door could be a mistake.

“Staples dependency” we know from Innis onwards. It can mean reliant upon, dependent on, the export of staples, and permits of a staple theory of linkages as economic theory. It can also mean a resource margin of a more developed imperium. Economic theory is infused by the power relations inherent in “dependency” and is transformed into political economy. In the shifting fashions of scholarship, over time “dependency” came not to be permitted as appropriate political economy. This in turn meant the purging of “nationalism” as a tolerable response at the risk of losing a political edge. But the idea of a “staples trap” implicit in Innis could not be wished away.

Take the phrase “extraction empire.” “Empire” takes on a new meaning. On the one hand, it is the terrible colonization within Canada of indigenous people. Canada as a settler society is exploiter rather than exploited. On the other hand, it is the transformation of resource exploitation at home into resource exploitation abroad. Comparative advantage in trade becomes over time comparative advantage in outward direct investment, notably in mining. Canada becomes an imperium in its own right, though note this by no means requires it to shed its “dependency” within a larger imperium, such as the United States.

“Extraction” is a potent word that conjures up the wrenching, the wounding of the planet, the violation of nature as technology deeply alters environment. It gives a whole new perception to the staples trap which, in the contemporary case of bitumen, becomes a deadly carbon trap. Governments, national and regional, are sucked into a black hole.

Our old friend Dependency takes on a stark new dimension. Economics alone exposes economic rents, or surplus, which can be captured by the state and in what would seem like the best of all worlds, can be used to help the poor, creating safety nets and building a welfare state. But the society then becomes massively dependent on the surplus from the revenue resulting from resource exploitation, and dangerously exposed to social breakdown in the event of a plunge in the price of the staple – as we are presently seeing with respect to oil and Venezuela.

What triggers these ruminations on staples one more time is the appearance of a monumental 800 page book, titled Extraction Empire, published by MIT Press and edited by Pierre Belanger, a landscape architect at Harvard. Full disclosure: the opening essay in the book titled “Unsettling the Mining Frontier” is mine, billed as a Foreward. It takes off from Innis’s neglected classic Settlement and the Mining Frontier but shows Innis’s limitations as a white male with respect to the consequences of staples exploitation for indigenous people, for women, and for the environment a.k.a nature.

Back to the book which has the revealing sub-title Undermining the Systems, States and Scales of Canada’s Global Resource Empire 2017 to 1217. Counting back 800 years to the Magna Carta which reified property, and distinguished between property rights to the surfaces of lands and subsurface rights. This was critical to the appropriation of rights of indigenous peoples in the so-called New World, who not only failed to make settled use of the surface resources and certainly had no claim through use to sub-surface rights.

September 15th marked the tenth anniversary of the fall of Lehman Brothers, destabilizing Western economies at levels not seen since the 1930s. It also marked the second week of fall classes, with many economics graduate students cranking through equations that define the discipline’s conventional macroeconomic models. With such names as New Classical, Real Business Cycle and New Keynesian, these models can all be traced to the rational expectations revolution of the 1970s, which sought to explain stagflation when the conventional Keynesian framework could not. The rational expectations approach attempted to provide more precise behavioral microfoundations than the Keynesian model by positing that economic actors can form expectations of future economic values, say inflation, such that on average, their predictions of future values tend to be correct. This assumes the actors share the same understanding of the structure of the economy and past economic data. This research program would come to dominate macroeconomic scholarship and strongly influence policy makers, culminating in the creation of the dynamic stochastic general equilibrium (DSGE) model, a popular forecasting and policy analysis tool used in central banks and finance departments.

This approach to macroeconomic modeling came under scrutiny following the 2008 crisis, with Nobel laureate Paul Krugman asserting that most of the macroeconomics over the past 30 years was “spectacularly useless at best, and positively harmful at worst”. While this did spark some soul-searching within the discipline, the debate has been inconclusive. Several policy-making bodies are taking seriously the limitations of 1970s macroeconomics. In its recent Medium-term Research Plan, the Bank of Canada recognises that the crisis has challenged its reliance on New Keynesian DSGE models, encouraging the exploration of alternative modeling paradigms, such as agent-based and stock-flow consistent models.

On Canadian campuses, however, where the next generation of macroeconomists are being trained, there is no clear signal that similar changes are being made in the curriculum of grad-level macroeconomics. A recent panel discussion among academic economists featured the admission that the 2008 crisis was the most embarrassing empirical failure of the profession since the Great Inflation of the 1970. Yet, in the same breath, that professor said he wouldn’t change a thing in his teaching. Indeed, a glance at the macroeconomics syllabuses of several top Canadian grad schools find little evidence of a shift away from teaching the rational expectations-grounded macro models that have come under criticism.

Professors tend to teach what they are taught. With the sunk cost of prepping for PhD macroeconomic comprehensive exams, they have little incentive to develop a new course involving subject matter in which they are not trained. Further reinforcing the status quo is the tendency to teach what you research. Working in a climate of publish or perish, macroeconomic profs have good reason to not deviate from the dominant research agenda, which remains wedded to 1970s macro. In the absence of strong leadership for change or a mandate from either the dean or the premier to sit down with one another and re-design the curriculum, teaching macro in the post-crisis era will continue to be business as usual.

Yet this is not in the public interest. Given the acute financial stress experienced ten years ago, we have a stake in knowing that the policy makers of tomorrow are well prepared to confront episodes of economic downturn and instability. Learning to use a larger modeling toolbox is part of such preparation.

So, what are Canada’s economics students to do in the meantime as they are grind through the math describing a DSGE model? As befitting any college course where critical thinking is one of the learning outcomes, here are some questions students may ask about the models they are taught:

1. Who is in the model? The basic models tend to have a single agent representing all consumers who are assumed to be sufficiently alike as autonomous rational optimizers sharing common knowledge. Can the model accommodate multiple actors who may differ by age, preference, belief, resources and class?

2. Is there room for “black swans”? The 2008 crisis was precipitated by the collapse of the U.S. subprime mortgage market, an event deemed of low risk but of high impact. How does the model address this and other examples of fundamental uncertainty?

3. What kind of markets are modelled? Models with perfect competition behave very differently from more realistic models with imperfect competition, information asymmetries, price rigidities and institutional constraints.

4. Is there a financial sector? Perhaps the strongest criticism of the 1970s macro models was the reduction of complex financial plumbing to a single interest rate variable. Can these models feature lenders and borrowers? Are there banks? How does money fit in?

5. Does the model have to move to equilibrium? Following an economic shock, standard models tend to instantaneously jump to a new equilibrium path. However, observations of macroeconomic variables as they unfold over time suggest that such adjustment may be a much slower, sequential process. Understanding this path of adjustment may be of greater importance than the equilibrium destination.

6. How are these models empirically tested? A model’s usefulness should be judged by how it explains actual economic history.

With these and other critical questions about the core macro teaching models, tomorrow’s dismal scientists should be better prepared to confront challenging economics times.

There’s an exceptional opportunity for a bright and critical-minded economist who is as passionate about social justice and working on behalf of unions and working people as they are about working with spreadsheets: CLC Senior Economist.

Members of the Progressive Economists Forum noted with dismay the premature cancellation of Ontario’s basic income pilot and have penned an open letter to Federal Minister Jean-Yves Duclos (Families, Children and Social Development) calling for federal support for the project. So far, the letter has been signed by 50 Canadian economists and researchers.

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Dear Minister Duclos:

As economists and researchers, we noted with dismay the premature cancellation of Ontario’s Basic Income Pilot. The announced cancellation before the first anniversary of full enrollment ensures that no useful data can have been collected to date, and none will now be collected. This deprives not only Ontario but also the rest of Canada of valuable evidence that might have influenced policy. Ontario was one of several Basic Income experiments worldwide that, together, would have allowed international comparisons and rational policy development.

We, the undersigned economists and researchers, are writing to ask you to use the resources and authority of your office to salvage what you can of the Ontario Basic Income Pilot for the benefit of all Canadians and, especially, to ensure that the 4,000 vulnerable participants who agreed in good faith to participate in Ontario’s experiment are treated in a just and humane manner.

Closing the experiment with no announcement of how participants will be transitioned out of the program is unethical. Participants used the money they received from participation in the experiment and relied upon the promises that were made by the Ontario government to make long-term plans to better their lives. They leased apartments, registered in postsecondary education and borrowed money to invest in the future wellbeing of their families. As a result of the cancellation, they are likely to be worse off now than before they agreed to open their lives to researchers. This is unconscionable and must not be allowed to happen.

Over at the Research Blog of the Calgary Homeless Foundation, I’ve written a ‘top 10’ overview of a study on which I’m co-author. It essentially asks the question: “When homeless people are placed into subsidized housing with social work support, for how many months/years do they require that social work support?”

The study relies on an impressive data set about ex-homeless people who’ve been placed into subsidized housing with social work support in Calgary. Methodologically, the study uses survival analysis and hazard models.

The late Abraham/Abe Rotstein (1929-2015) was an economist of a leftist persuasion, literally a Left Liberal. He left behind an almost completed manuscript which he had been working on for more than three decades. It has now been published. Its title Myth, Mind and Religion: The Apocalyptic Narrative is indicative of its extraordinary breadth.

Problems, possibilities, catastrophes, which compel resolution present themselves in an apocalyptic manner: oppressor/victim, inversion of victims into masters, and a salvation regime as the outcome. There are chapters on Jesus, Luther, Hegel, Marx, Hitler, etc. For example, Marx, in a manner familiar to economists: capital oppresses labour, the proletariat as victim overthrows the capitalists, there is heaven a.k.a. communism on earth.

Rotstein chose to go far beyond his own discipline of economics – which is a tribute to his intellectual courage – but he is not without relevance to our present day concerns about matters economic and beyond in these turbulent, perhaps apocalyptic, times.

On contemporary matters, Rotstein reminds us of, in his words, the Radical Decade from the mid-1960s to the mid-1970s. The cry was for liberation – by black people and indigenous people from racism and for civil rights, students, colonies and dependencies from the imperium, women, gays – and for respect for the environment, for Nature, from the assaults of capital in particular. Radicalism proved ephemeral but the demands have not ceased.

Rotstein was writing before Trump and the rise of the alt-right, but, as noted, he does deal with Nazi fascism, of the perverse claim that the populace was oppressed by the Jews, the Other of the times, and must be annihilated. Today it is immigrants and refugees who constitute the Other and who must therefore be oppressed in the name of white supremacy.

Rotstein sees out-of-control technology as the apparent menace of our times – think today’s carbon emissions and climate change, the attacks on privacy and democracy by digital media, job destruction from artificial intelligence, “the robotization of life.” The victims are the many but what or who are the oppressors and what is to be done.

Rotstein is no longer with us to discuss these matters. His legacy is to warn us of the dangers of apocalyptic thinking, a mode of thought that he sees as characterizing the Judaeo-Christian West for three millennia.

The provincial election of June ended 15 years of Liberal electricity policy in Ontario. Anger over high electricity prices continued to be an election issue, contributing to the Liberal loss of power and official party status (reduced from 55 to 7 seats). The PCs have formed Government with 76 seats, while the NDP is official opposition with 40 seats, and the Green Party won their first seat.

The PC Government has moved quickly to act on some of their election promises and other unannounced initiatives, including on the electricity file, convening an exceptional summer session of the Legislature. The new Minister of Energy, Greg Rickford, cancelled 756 renewable energy contracts via Ministerial Directive in early July. Later in the month the Government rushed an omnibus Act through the Legislature (time-allocated debate, no Committee review, no public hearings, no opportunity for amendments) that changed the governance of Hydro One and canceled the White Pines wind power contract in Milford. Here I will first review the Government’s options with respect to the Liberal’s “Fair Hydro Plan” (FHP) before I discuss these cancellations.

The question is taken from the title of an article by Nancy Olewiler of Simon Fraser University in the Canadian Journal of Economics (November 2017), which, as it happens, was delivered as the Innis Lecture at the meetings of the Canadian Economics Association in 2017: “Canada’s dependence on natural capital wealth: Was Innis wrong?” Her answer: she writes “Literature and recent debate reject his prediction that Canada would suffer lower levels of economic growth and well-being due to its dependence on exporting its natural resources,” and then, after some testing of her own, reaffirms this position. Her research is of interest in its own right but quite misleading as to Innis.

It is not even clear that Innis can be read as holding to such a pessimistic view. The economic historian Peter George, in an overview of the history of mining in Ontario in 1967 writes: “Innis believed that the mining industry would reduce Ontario’s dependence on the export of staple commodities by contributing to a highly integrated advanced economy” and adds “Ironically Innis was wrong in his optimism with respect to mining.”

Innis was, it must be insisted, an economic historian and can hardly be said to have had a central interest in “prediction” – or even policy which is the central concern of the economist today. In fact, Olewiler offers no evidence that he was wrong in his historical writings which is what matters most in an evaluation of Innis. The jury can give little weight to Olewiler’s substantive contemporary findings, post-1990 – being two decades of a half-millennium!

Olewiler’s error lies in imagining that she is giving a definitive assessment of Innis or of the staple approach to Canadian economic history.

What is lost in Olewiler’s reductionism of Innis is the breadth and depth and sheer power of his historical writings: “The economic history of Canada has been dominated by the discrepancy between the centre and the margin of western civilization. Energy has been directed toward the exploitation of staple products and the tendency has been cumulative…Agriculture, industry, transportation, finance and government activities tend to become subordinate to the production of the staple for a more highly specialized manufacturing country.”

It is true that Innis was incorporated in the 1960s and 1970s into the emergent New Canadian Political Economy where there was a tendency to see Innis as a pessimist and Mackintosh as an optimist on Canada’s economic prospects as an exporter of staples. But to be fair both to Innis and to the new political economists, their focus was more, much more, on Canadian dependence as a marginal area within the American empire. This is not a matter on which Olewiler has anything to say; she is an economist and not a political economist and her answer must be seen in that context.

Daniel Drache described Canada as a case of “advanced resource capitalism” and Olewiler’s evidence on productivity supports that designation. Drache is also known as a leading analyst of the “staple trap” and it would be hard to find a clearer example of that than today’s bitumen.

Olewiler is also unaware of the important post-Innisian book by the respected economic historian W.T. Easterbrook, North American Patterns of Growth and Development (1990) which sees Canada’s economic history in a continental context in the long run as one of “growth, “of a “pattern of persistence” as a staple exporter, in contrast to a “pattern of transformation,” of “development,” in the northern United States. To return to mining as a staple, to further complicate the story, Canada’s new global dominance in gold might be cited today as evidence of imperial competence suggestive more of the transformation of a centre than the persistence of a margin.

Where Olewiler is to be lauded – and forgiven overall – and where Innis, albeit like the mainstream economists who were his contemporaries, was wrong, was with their general neglect of social costs such as the consequences for the environment of resource extraction. I am wholeheartedly in agreement with Olewiler that, whatever our view of Innis, climate change from fossil fuels – from oil and gas as staples – compels us to see their extraction as intolerable.

Olewiler is also right in seeing Innis as a student of regionalism and its exacerbation by staple exports, which is indicative of his relevance to the study of Alberta and the tar sands. National policy on climate change is presently impaled by this. In the insightful language of Brendan Haley, the staples trap is alive and well as it has morphed into the carbon trap. And as Gordon Laxer has demonstrated in his research on the tar sands, the staple approach has, unfortunately, been given a new life in Canadian studies. Olewiler, in her deft description of the tar sands and climate change, unwittingly affirms the staple approach and Innis in the large.

Mariana Mazzucato. The Value of Everything: Making and Taking in the Global Economy. Allen Lane. 2018.

The playwright Oscar Wilde quipped that a cynic is a person who “knows the price of everything and the value of nothing.” As Mariana Mazzucato argues in her important and stimulating new book, “The Value of Everything,” that adage could be applied to the vast majority of mainstream, neo-classical economists.

Mazzucato is the author of the previous bestseller, The Entrepreneurial State, which argued that governments have been absolutely pivotal to the innovation process in successful advanced industrial economies, often taking on big risks and opening the way for later private sector investment. Her new book broadens the argument, claiming that mainstream economics is systematically wrong about the value creation process and needs to be replaced by a new framework which distinguishes clearly between value creation and unproductive and destructive value extraction.

This argument is important in setting the stage for a social democratic economics and a genuinely mixed economy where governments would take an active economic leadership and investment role and tightly regulate the private sector in the public interest. Social democrats have too often conceded to the argument that private sector entrepreneurship is the driving force of wealth creation, and that governments should largely confine themselves to re-distribution of income and wealth through progressive taxes and welfare state programs.

Contemporary neo classical economics makes market prices the only measure of value, and sets aside the distinction made by the classical economists (Smith, Ricardo and Marx) between productive and unproductive economic activity and labour. In the neo classical world, profits reflect and are justified by the productive contribution of capital, and the fact that goods and services are sold on the market for a profit shows that they have value to consumers. In this light, the national economic accounts largely exclude or hugely undervalue production outside the market by households and by governments, and fail to register the fact that many significant private sector activities are parasitic on the productive economy and actually destroy value.

The dominant paradigm was actually overthrown at a highly theoretical level during the famous Cambridge capital controversy of the 1950s and 1960s, when Joan Robinson argued that profits could not be shown to reflect returns to capital, but rather reflected the balance of bargaining power between capital and labour. To be sure, investment in physical capital and research by the private sector make an important contribution to value creation, but wealth creation is above all a social process.

It is nonsense to argue that the wealth and income of hedge fund billionaires reflects their individual productive contribution, as opposed to their ability to extract profits from socially created value. Many progressive economists such as Nobel prize winner Joe Stiglitz argue that much of the modern economy consists of sectors in which rents or excess profits are extracted by dominant businesses due to limited competition and control of intellectual property rights among other factors. For example, big pharma and the tech giants like Google and Facebook earn profits well above normal rates of return due to their power to shape markets.

Mazzucato closely documents the value extraction role of the finance sector, whose share of total profits has grown rapidly since deregulation in the 1970s. While banks and other financial institutions do play a productive role in part by directing financial capital to productive uses, most real business investment is in fact financed by retained corporate earnings. Meanwhile, finance has directed resources to almost purely speculative and economically destabilizing activities such as hedge funds and creation of exotic financial instruments such as derivatives which merely transfer dollars between winners and losers, as in a casino where the dealer always wins.

As well, finance has had damaging impacts upon real economy highly productive businesses by inisting on maximizing shareholder value and demanding short term profits paid out through dividends and share re purchases as opposed to providing ‘patient’ capital for long term investment in equipment and innovation which boost real value added and productivity. Despite years of so-called financial innovation, it is hard for truly innovative new companies to attract capital since even venture capital funds are oriented to a quick turnover of capital and have very high “hurdle” rates of return In this context, very early start up capital often comes from governments which are prepared to take bigger risks for bigger long-term payoffs.

Mazzucato further argues at length that governments play a much more important role in value creation than is often appreciated. Much of government activity is treated in the national economic accounts as consumption, even through public services help create a great deal of value in the private sector. Public sector spending in areas such as education at all levels and basic research is very much part of the social process of production and value creation, and governments often create the markets served by the private sector. For example, the DARPA program in the United States created the internet and the basis for much of the digital information economy through basic research and support for private sector pioneers.

It has only been recently that government investment has been partially recognized as such in the economic accounts, and conventional accounting still judges the value of public services to be the costs of inputs, mainly labour. By this definition, more public spending cannot raise productivity and value-added in the economy.

As in her previous book, Mazzucato is very much an advocate of an expanded entrepreneurial role for government in supporting, not just research and high levels of public investment, but also in setting ambitious goals and missions, such as decarbonizing the economy. She argues that governments should take an ownership stake in the productive economy to collect a social return on public investment for citizens which could be used to fund social programs and public services as well as to create greater social equity. In the Canadian context, she would likely favour taking large equity stakes in innovative enterprises to provide long term capital for growth, while also seeking greater control of the economy and a fairer distribution of income and wealth.

The Value of Everything is a stimulating and informative overview of value creation and destruction in today’s economy. It is very much part of a wider project to develop a new progressive and social democratic economics oriented towards the creation of real value and social equity, as opposed to maximizing GDP.

Andrew Jackson is Adjunct Research Professor in the Institute of Political Economy at Carleton University, and senior policy adviser to the Broadbent Institute

An essential but perhaps overlooked way of looking at the economy is a sector financial balance approach. Pioneered by the late UK economist Wynne Godley, this approach starts with National Accounts data (called Financial Flow Accounts) for four broad sectors of the economy: households, corporations, government and non-residents.

Here’s how it works: in any given quarter or year each sector can be a net borrower or lender, but the sum of the four sectors’ borrowing/lending must equal to zero. This is an accounting identity reflecting the fact that one sector’s borrowing must be another’s (or the combination of all others’) lending.

Consider a government deficit. The flip side of that deficit is that some other sector(s) is in credit by the same amount. For example, a $1 billion in government borrowing must be matched by $1 billion in lending from some combination of households, businesses and non-residents. The same is true about the balances for any other sector. The overall balance for the domestic economy (households, corporations and government) must be offset by an equivalent balance vis-à-vis non-residents.

We can look at these flows over time and map them on to events and policy actions affecting the Canadian economy. Some caution must be taken around interpreting causation in this analysis, but it is a useful framework for thinking about what’s happening in the economy.

Figure 1 shows the four sector balances going back to 1990 (as a percentage of GDP). The lead up to and period after the 2008 global financial crisis is also of great interest. Lines above zero represent a credit position, or net lending; below zero is a deficit position, or net borrowing.

Let’s start with government, in this case the combined federal and provincial government balance (in grey). Many readers will remember the large government deficits of the 1980s and early 1990s, which were headline news and to this day have biased the thinking of all political parties towards austerity. In the early 1990s, those government deficits were largely financed by households (blue) and non-residents (yellow).

As the Canadian economy recovered from a bad recession in the early 1990s, it gained strength through the rest of the decade. Strong revenue growth combined with spending restraint drove combined federal and provincial deficits to zero by 1997, followed by surpluses for most of the next decade (apart from two very small deficits in 2002 and 2003).

In the wake of the 2008 financial crisis we then see the government balance drop to a deficit of 4.7% of GDP in 2010, reflecting expansionary fiscal policy. Relative to GDP these later deficits are nowhere near as large as the deficits in the early 1990s. In each case of deficit, however, it is useful to remember the flip side: the private sector wanted to buy government bonds. Around 2008-10 in particular, investors wanted safe havens in which to place their money.

The changing behaviour of households (in blue) is significant. Historically, it was households who were net lenders to corporations and governments. I was not able to get data prior to 1990 online but that surplus position for households continues before 1990 as well.

That dynamic changes in the mid-1990s. As governments borrowed less, households lent less. But when governments turn to deficits after 2008 it is not households from whom they are borrowing (as would have been expected given historical patterns). Indeed, households become net borrowers as of 1997 and remain so to this day, with net borrowing peaking at 4.8% of GDP in 2007. There is some retrenchment back to 2.2% of GDP by 2009, but household borrowing starts to grow again in the 2013 to 2017 period, and hits 3.5% of GDP in 2017.

This should not be a surprise to anyone following the Canadian economy, in particular the run-up in mortgage debt in recent years. This era, especially 2001 onward, is characterized by very low interest rates, which enable households to take on more debt for a given level of income. And as home prices rose, this new equity for homeowners allows for even greater debt loads. Unfortunately, these data do not break down the distribution within the household sector, so the total is masking some deeply indebted households while some percentage of wealthy households would be in credit positions.

What about corporations? Historically corporations borrowed from households (before the period in Figure 1), but starting in the 1990s, then really picking up in the 2000s is the fact that corporations become net lenders. A study from Statistics Canada attributed this to surging profits accompanied by a slowdown in capital investment (i.e. machinery, equipment and factories) and an increase in financial investments. This pattern of “dead money” – in the words of then-governor of the Bank of Canada Mark Carney – has deteriorated in recent years and the corporate sector even goes into deficit in 2015.

Figure 2 breaks out the corporations balance into financial (banks, insurance companies, etc) and non-financial corporations. Financial corporations are consistently in a net lender position, as would be expected. Non-financial corporations show greater volatility, but notably swing into a net borrowing position since 2012.

Finally, go back to Figure 1 and look at non-residents. In the early 1990s non-residents lent to Canadian governments, but during the 1999-2007 period Canadian corporations were net lenders to non-residents, perhaps reflecting trade and investment liberalization.

After 2008, we see a dramatic shift to non-resident lending, and at fairly large magnitudes of around 4% of GDP per year. Even while government deficits shrink after 2010, the total inflows from non-residents continue through to 2017. These data do not tell us from which countries the flows from non-residents are coming, although the US is historically Canada’s largest foreign investor by far, followed by several European countries (Netherlands, Luxembourg, UK and Switzerland).

Overall, this analysis shows some major shifts in the relationships across sectors of the Canadian economy. The shift of households into an ongoing deficit position is notable, as is the role of non-resident lending in recent years. Restrictions to dampen housing markets and the introduction of foreign buyer taxes in BC and Ontario suggest non-resident lending will decline as a share of GDP. And the record levels of household indebtedness, plus increases in interest rates, also point to a potential rebalancing for the household sector.

** With thanks to Joelle Leclaire and David Pringle for comments on an earlier draft.

I’ve just reviewed Professor Carey Doberstein’s book on homelessness governance (UBC Press). The book looks at the way decisions were made pertaining to funding for homelessness programs in Vancouver, Calgary and Toronto during the 1995-2015 period.

Points raised in my review include the following:

-Homelessness trends look quite different across the three cities. For example, it can be growing in one city, but declining in another.

-One of the book’s main arguments is that better decisions pertaining to homelessness programming are made when multiple stakeholders are engaged in decision-making early and often.

-The book argues that Vancouver and Calgary have done a relatively good job of such engagement—more so than Toronto.

Last month I published a full-length article in the “The Monitor” magazine providing a “how we got here” analysis of the Ontario electricity sector and some options for the next Government. Since then, two things have changed: first on May 31 two investigative journalists, Carolyn Jarvis and Brian Hill, wrote an excellent story for Global News about how successive Liberal Ministers of Energy ignored expert agency advice, which resulted in Ontario households having to pay billions of dollars more for electricity (see 3:51 Global News video here); and second, on June 2 the current Liberal Premier conceded that the Liberal party will not win the election to be held tomorrow (June 7).

My article brings together and updates the four electricity-related blogs that I’ve prepared at the PEF (first, second, third and fourth), focusing on the gradual, stealth privatization of electricity generation and showing how criticism of this process by progressive groups was muted by the promise of energy democratization and renewables (wind and solar) generation that would help reduce emissions and pollution. The electricity sector in Ontario became a prime case study of some of the inequality-creating trends buffeting our societies. Corporations (and their investors) who secured lucrative contracts and high-income households and speculators that could afford solar panels made out like bandits, while low-income households in Ontario faced growing electricity poverty. When prices became a political liability, the government responded not by going after the power producers, but rather by borrowing on behalf of ratepayers. I argued that objectives matter, and that the experience in Ontario shows that governance, policy and implementation matter even more.

Ontario Conservative leader Doug Ford finally released a partially costed version of his election promises in his Plan for Ontario in the last week before the election. This includes approximately $7.6 billion in tax cuts and revenue reductions and a net $500 million reduction in annual spending.[I]

At the same time, Ford has also promised that “we will balance (the budget) maybe the third or fourth year” e.g. by 2021/22. While Ford has claimed he wouldn’t lay off public sector workers—unlike his predecessor Tim Hudak who promised he’d lay off 100,000—with his additional billions in tax cuts, it will be impossible to balance Ontario’s budget in three or four years without job losses.

This analysis provides best guess estimates of the employment impact of Ford’s promises using economic multipliers publicly available from Statistics Canada and Finance Canada. A previous post by Edgardo Sepulveda includes an analysis of the impacts on inequality of the different parties’ fiscal plans, finding that the Ford plan would increase inequality the most, while the NDP plan would reduce it, while a recent post by Jim Stanford includes a prescient guestimate that Ford’s plan would lead to a net loss of about 75,000 jobs. The analysis provides a more detailed summary estimates of the likely impact of Ford’s plan on jobs using these multiplier tools.

Ford has said he would balance the budget by achieving “efficiencies” through spending cuts of about 4%, but he hasn’t provided any details of those. Given his promises of over $7.6 billion in annual tax cuts, a 4% cut to the Ontario government’s overall spending still wouldn’t be enough to balance the budget by 2021. He’d need to cut Ontario’s program spending by 4.9% from its projected levels in 2021/22 to eliminate the deficit[v]. In the absence of any further information from Ford and the Conservative party of what degree and how he would cut spending, this analysis considers three scenarios:

A proportional cut to Ontario’s program spending[ii] of 4% or $6.2 billion effective in 2021. This would still leave a deficit estimated at $1.3 billion for that year using the Liberal government’s accounting.

A proportional cut to Ontario’s program spending of $7.6 billion or 4.9% of program spending that would be required to balance the budget by 2021 given Ford’s additional tax cut promises.

A cut to public spending of $13.6 billion or by 8.8% of program spending, in 2021. This is the amount that would be required to balance Ontario’s budget in 2021 using the Auditor General’s recommended accounting treatment for the Liberals Fair Hydro Plan and net pension assets, which adds $6 billion to the deficit.

The job losses from these spending cuts would be counter-balanced to some degree by indirect and induced job gains resulting from increased private sector spending resulting from Ford’s promised tax cuts. However in all these scenarios, the public and private sector job losses associated with spending cuts would significantly exceed job gains from tax cuts. In fact, even with the more modest spending cut scenario, the largely private sector job losses resulting from cuts to public spending would exceed the jobs generated from tax cuts.